A COST-FREE HAIRCUT FOR GREECE

A Wealth Bond is a debt instrument in which the capital debt
is index-linked to the National Average Earnings, NAE, of a particular nation,
for example, Greece, Germany, Italy etc.

A case has been made out that this index will largely
protect the value of the debt for such things as national pension funds,
savings, and so forth - the fund will keep pace in value with the NAE of that
particular nation - not precisely but over a longer term, quite well. This is
explained in Edward Ingram's 'A Short Tract on Financial Stability' series.

Think of NAE as a unit of that Nation's own wealth.

SUMMARY: Wealth Bonds make an ideal holding for pension
funds and banks and even the people of the nation in which the NAE index is denominated.
NAE of Greece for Greeks, NAE of Germany for Germans, and so forth.

The relative value in the Bond gets preserved as NAE for that nation
rises because the capital value of the Wealth Bond is index-linked to that NAE
index.

THE GREEK HAIRCUT ISSUE

Then there is what I suggested to my friend at the ECB regarding
Greek debt owed to other nations within the EU. Convert / exchange the whole of
the Greek debt into various and different NAE-linked Wealth Bonds, in each nation
for each nation that holds Greek Debt.

Create Wealth Bonds denominated in Greek NAE for Greeks and
in other National NAE's for other nations.

Most of the debt will be in the NAE of other nations that
currently hold that debt or the IMF which also holds a significant amount.
Because those other NAE will grow more slowly than the Greek revenues, upon Greek
economic recovery, the size of the Greek Debt in terms of Greek GDP and tax
revenues will fall. It could fall by as much as 30% if Greek NAE rises by that
amount more than the rest of the EU, or if Greek GDP rises that much higher than
EU GDP.

The recovery can be triggered by the advent of those Wealth
Bonds giving an extended 'postponement of repayments - IF the Greeks take
measures to balance their pension and other budgets.

And the Greek economy might also be boosted with a' VAT
Punch' as explained in my Short Tract on Financial Stability. They might like
to look at the general financing reforms on offer in that tract.